John MacDonald v Commonwealth Superannuation Corporation
[2015] AATA 237
•21 April 2015
[2015] AATA 237
Division GENERAL ADMINISTRATIVE DIVISION File Number
2014/5048
John McDonald
APPLICANT
And
Commonwealth Superannuation Corporation
RESPONDENT
DECISION
Tribunal Dr James Popple, Senior Member
Date 21 April 2015 Place Canberra The decision of the Military Superannuation and Benefits Reconsideration Committee on 2 September 2014 is set aside and, in substitution, the following decision is made:
the applicant made an election under s 61B of the Defence Force Retirement and Death Benefits Act 1973 to become a contributing member of the Defence Force Retirement and Death Benefits Scheme before resuming full-time service with the Australian Defence Force on 12 May 2004.
..............................[sgd]..........................................
James Popple, Senior Member
CATCHWORDS
SUPERANNUATION — Defence Force Retirement and Death Benefits Scheme — member resumed continuous full time service — whether member made an election to remain in DFRDB scheme — requirements to make election — member completed form and took steps to have form sent to ComSuper — decision set aside and substituted.
LEGISLATION
Defence Force Retirement and Death Benefits Act 1973, s 61B
Military Superannuation and Benefits Act 1991
CASES
Bullock and Commonwealth Superannuation Corporation [2012] AATA 274
Defence Force Retirement and Death Benefits Authority v Gregory (2009) 179 FCR 535
Defence Force Retirement and Death Benefits Authority v Mathews (2011) 192 FCR 197
Gill and Commonwealth Superannuation Corporation [2012] AATA 876
Howie and Commonwealth Superannuation Corporation [2013] AATA 114
Marston and Defence Force Retirement and Death Benefits Authority (2011) 121 ALD 232
Metcalf and Commonwealth Superannuation Corporation [2012] AATA 261
Strutt and Defence Force Retirement and Death Benefits Authority (2007) 96 ALD 501
Whitfield and Commonwealth Superannuation Corporation [2012] AATA 613
REASONS FOR DECISION
James Popple, Senior Member
21 April 2015
Summary
I set aside the decision of the Military Superannuation and Benefits Reconsideration Committee. The Committee was incorrect in deciding that a recipient member of the Defence Force Retirement and Death Benefits Scheme (the DFRDB scheme) had not made an election to stay within the scheme under s 61B of the Defence Force Retirement and Death Benefits Act 1973 (the DFRDB Act) before he resumed full-time service.
Background
On 30 January 1999, Colonel John McDonald retired from the Australian Defence Force (the ADF), after more than 30 years’ service, and became a recipient member of the DFRDB scheme. The Commonwealth Superannuation Corporation (CSC) is trustee of the DFRDB scheme. ComSuper is the scheme administrator. I have used “ComSuper” in these reasons to refer to both ComSuper and CSC. The two are separate entities, but that is not relevant to this review.
On 12 May 2004, Colonel McDonald resumed full-time service with the ADF. Colonel McDonald says that, before resuming full-time service, he completed a form and arranged for it to be sent to ComSuper. In that form, he says, he elected to become a contributing member of the DFRDB scheme. ComSuper says that it never received Colonel McDonald’s form.
On 31 May 2005, ComSuper wrote to Colonel McDonald advising him that, as he had not made an election under s 61B of the DFRDB Act, he had automatically become a member of the Military Superannuation and Benefits Scheme (the MSB scheme). The letter also asked Colonel McDonald to repay retirement pay that he had received during the period of his reengagement. ComSuper said, and still says, that Colonel McDonald was not entitled to that retirement pay because he was no longer in the DFRDB scheme.
On 27 June 2005, Colonel McDonald replied to ComSuper saying that he had made an election, under s 61B of the DFRDB Act, to stay in the DFRDB scheme. For that reason, he said, he was not liable to make the repayment. On 23 October 2005, Colonel McDonald wrote again to ComSuper, following up on his earlier correspondence. On 1 November 2005, ComSuper wrote to Colonel McDonald, advising him that his letter of 27 June had been accepted as a request for reconsideration of its decision, and that a response was being finalised. On 20 January 2006, Colonel McDonald sent another follow-up letter to ComSuper.
On 1 February 2006, according to a ComSuper file note, a ComSuper officer rang Colonel McDonald and advised him to send a statutory declaration about the circumstances of his having sent a form to ComSuper electing to stay in the DFRDB scheme. The file note indicates that the officer told Colonel McDonald that such a statutory declaration (together with a statutory declaration that ComSuper had already obtained from Colonel McDonald’s former supervisor[1]) “would see the end of the matter” and “the overpayment would not exist”. Colonel McDonald sent ComSuper a statutory declaration on 23 February 2006.
[1] See [27] and [29] below.
On 6 November 2013, ComSuper wrote to Colonel McDonald advising him that ComSuper did not consider the statutory declarations to be “adequate evidence of [his] election to remain in the DFRDB scheme” and that the overpaid retirement pay remained a debt owed to ComSuper. The letter apologised for ComSuper’s delay—almost eight years—in advising Colonel McDonald of its decision, which was due to a “break down in process”.[2]
[2] ComSuper’s letter of 6 November 2013 was prompted by a general telephone enquiry about his pension, and a follow-up e-mail, from Colonel McDonald on 1 October 2013.
On 17 December 2013, Colonel McDonald sought a review of ComSuper’s decision. On 2 September 2014, the Military Superannuation and Benefits Reconsideration Committee affirmed ComSuper’s decision.
On 30 September 2014, Colonel McDonald applied to the Tribunal, under s 107 of the DFRDB Act and s 29(1) of the Administrative Appeals Tribunal Act 1975, for review of that decision.
Decision under review
The decision under review is the decision of the Military Superannuation and Benefits Reconsideration Committee on 2 September 2014, affirming ComSuper’s decision that Colonel McDonald did not make an election under s 61B of the DFRDB Act.
Issue
The issue in this review is whether Colonel McDonald made an election under s 61B of the DFRDB to become a contributing member of the DFRDB scheme before resuming full-time service with the ADF on 12 May 2004.
The interaction of the two retirement schemes
The Federal Court summarised the interaction of the two retirement schemes (the DFRDB scheme and the MSB scheme) in Defence Force Retirement and Death Benefits Authority v Mathews:
When the new scheme [the MSB scheme] was introduced by the [Military Superannuation and Benefits Act 1991—the MSB Act], a number of amendments were made to the DFRDB Act by the MSB Act (Pt 10). It is comparatively clear that these amendments to the DFRDB Act … were intended to govern the interaction between the old scheme and the new scheme and create an harmonious pension system involving two schemes with the old being superseded by the new though continuing to operate in relation to then members of the Defence Force who wished to continue to be participants in that scheme.
In summary the legislation operates this way. Section 6 of the MSB Act declares who is in the new scheme. A person not in the new scheme and remaining in the old scheme is an “eligible member of the Defence Force for the purposes of the DFRDB Act” (see s 6(2) of the MSB Act). Individuals who wish to remain in the old scheme must, in certain circumstances, make an election in writing under s 61B of the DFRDB Act.
…
Section 5A [of the DFRDB Act] operates (together with the definition of “eligible member”) to exclude from the old scheme any person who joined the Defence Force after 1 October 1991 or any Defence Force retiree who may return to full time service for twelve months or more who has not made a valid election to become a contributory member.[3]
[3] (2011) 192 FCR 197 at [10]–[11], [13] per Moore J.
Section 61B of the DFRDB Act provides:
61B Election by recipient member intending to resume full-time service
(1) Where a person:
(a) who is a recipient member; or
(b) in respect of whom deferred benefits are applicable under section 78;
intends to resume full-time service:
(c) as a member of the Permanent Forces; or
(d) as a member of a Reserve for a continuous period of not less than 12 months;
the person must, before resuming service, in writing addressed to CSC, elect:
(e) to become a contributing member; or
(f) to become a member of the MSB scheme.
(2) Subsection (1) does not apply if the person has previously:
(a) made an election under that subsection; or
(b) made, under subsection (3), an election to become a member of the MSB scheme.
(3) A recipient member who:
(a) intends to resume full-time service as a member of a Reserve for a continuous period of less than 12 months; and
(b) has not previously made, under this section, an election to become a member of the MSB scheme;
must, before resuming service, in writing addressed to CSC, elect whether or not to become a member of that scheme.
Federal Court authority
ComSuper referred me to the Federal Court’s decisions in Defence Force Retirement and Death Benefits Authority v Gregory[4] and in Mathews[5] in support of its argument that Colonel McDonald did not make an election under s 61B.
[4] (2009) 179 FCR 535.
[5] (2011) 192 FCR 197.
In Gregory the issue was whether the member was no longer a member of the Defence Force for the purposes of the DFRDB Act when he resumed full-time service and was, therefore, required to make an election if he wanted to stay in the DFRDB scheme. In Mathews the issue was whether the member (who had previously made an election) intended to resume full-time Reserve service for a continuous period of less than 12 months and was, therefore, required to make another election if he wanted to stay in the DFRDB scheme. The Federal Court found against the member in each case. In Mathews, the Court noted that “the legislative scheme provides little or no flexibility and can, as already arguably it has in the present case, operate oppressively on a given individual”.[6]
[6] (2011) 192 FCR 197 at [42] per Moore J.
In Gregory and in Mathews, the issue was not whether the member had made an election, but whether an election was required to be made. I think that Gregory and Mathews are authority for the proposition that a member who is required to make an election under s 61B before resuming service, and does not make such an election before resuming service, is excluded from the DFRDB scheme.[7] But neither case directly assists in deciding the question that I must decide in this review: did Colonel McDonald make an election under s 61B before resuming service?
[7] I note that Moore J in Mathews (2011) 192 FCR 197 at [27] said that Gregory “held that the new scheme makes it clear that failure to elect under s 61B has the consequence of placing the respondent in the new scheme”—that is, in the MSB scheme.
Relevant decisions of the Tribunal
ComSuper referred me to several decisions of this Tribunal in which s 61B of the DFRDB Act has been considered.
In Strutt and Defence Force Retirement and Death Benefits Authority,[8] the election was communicated by telephone only. The Tribunal pointed out that “an oral communication cannot satisfy the clear requirement in the DFRDB Act that an election must be in writing”.[9]
[8] (2007) 96 ALD 501.
[9] (2007) 96 ALD 501 at [19] per Carstairs SM.
In each of Metcalf and Commonwealth Superannuation Corporation,[10] Whitfield and Commonwealth Superannuation Corporation[11] and Gill and Commonwealth Superannuation Corporation,[12] the form by which the member purported to make an election was received by ComSuper after the member had resumed service. In each case, the Tribunal decided that the member had not made an election under s 61B. The same conclusion was reached in Bullock and Commonwealth Superannuation Corporation[13] and in Howie and Commonwealth Superannuation Corporation.[14] In both of those cases, ComSuper never received the written election.
[10] [2012] AATA 261.
[11] [2012] AATA 613.
[12] [2012] AATA 876.
[13] [2012] AATA 274.
[14] [2013] AATA 114.
In Marston and Defence Force Retirement and Death Benefits Authority,[15] on the same day the member (a) completed a form; (b) communicated his election by telephone; (c) resumed service; then (d) sent the form to ComSuper by fax. The Tribunal decided that the member had made an election under s 61B. In that case, ComSuper had asserted that an election under s 61B(3) is not made until it has been communicated in writing and that this does not occur until the communication has been received by ComSuper. The Tribunal did not accept that argument:
It is clear enough that a written election must be made prior to the resumption of service: between the time the undertaking to serve is given by a person and the time that person actually resumes service. But this does not mean in all cases that the election must be received by the Authority prior to that point in time. The section does not expressly require it; the requirement is for the election to be effectively made prior to the resumption of service. As will appear, to my mind, for an election to be effective it must be properly made in writing and telegraphed or communicated to the Authority. These are matters for proof in the face of uncertainty.
…
The only guidance the DFRDB Act provides is the direction that the person ‘must, before resuming service, in writing addressed to the Authority, elect whether or not to become a member of [the MSB Scheme].’ The election to be made under 61B(3) for the purposes of the DFRDB Act and the MSB Act is a statutory right to opt out of the default MSB Scheme. This is a right that requires the exercise of choice. It is crystal clear that section 61B(3) imposes express limits on the exercise of that choice, once properly preconditioned, concerning the manner and the timeframe of the election, where failure to comply, or failure to elect, will result in the default statutory scheme being applied. The election is to be made prior to the resumption of a period of service and it is to be in writing and addressed to the Authority. Satisfaction of these requirements does not require service of the written election on the Authority prior to the commencement of the period of service; service is not expressly or impliedly required by the section, nor do the objects and purposes of the DFRDB Act and the MSB Act require it. Nevertheless, for the election to be effective, it must be communicated to the Authority prior to the commencement of the particular period of service. I would not proceed too readily to accept any further limit on the exercise of the statutory right without express provision in the terms of the DFRDB Act or the MSB Act.[16]
[15] (2011) 121 ALD 232.
[16] (2011) 121 ALD 232 at [13], [16] per Webb M, footnotes omitted.
In Whitfield, the Tribunal noted that:
[ComSuper] accepted that Marston was correctly decided and accepted that there may be circumstances where, for various operational or other reasons, a member undertaking [continuous full-time service] may be precluded from providing the written communication prior to commencing the [continuous full-time service]. However, applying Marston, some form of communication with Comsuper was required—whether by telephone or email—before resuming work.
In this matter there was no such communication.[17]
[17] [2012] AATA 613 at [37]–[38] per Isenberg SM.
In Gill, the Tribunal said:
In my view, Member Webb’s interpretation [in Marston] of the requirements of s 61B(3) is correct. Relevantly, the election not to become a member of the MSB Scheme before resuming [continuous full-time service] must be “in writing addressed to CSC”. While there is no express or implied requirement for service of the written election on CSC, for an election to be effective requires that it be communicated to CSC. To find otherwise would be contrary to common sense.[18]
[18] [2012] AATA 876 at [21] per Handley DP.
In summary, based on these Tribunal decisions, for an election to be effective under s 61B:
·ComSuper must receive the election in writing before the member resumes service; or
·the member must make the election in writing and communicate their intention to ComSuper (for example, by telephone) before resuming service; and ComSuper must receive the election in writing (before or after the member resumes service).[19]
[19] See also Howie [2013] AATA 114 at [35] per Hotop DP, citing Marston (2011) 121 ALD 232 at 236–238 per Webb M and Gill [2012] AATA 876 at [17], [21] per Handley DP.
I note (respectfully) that s 61B requires only that the member “before resuming service, in writing addressed to CSC, elect”. It seems to me that a member meets the requirements of s 61B if they make an election in writing before resuming service then send that written election to ComSuper, even if ComSuper does not receive that written election until after the member resumes service. I do not see how the words of the provision, or practical necessity, require that the election must be communicated to ComSuper before the member resumes service.
Nonetheless, although I am not bound by previous decisions of this Tribunal, I see no reason not to follow these decisions of the Tribunal in coming to my decision in this review.
Did Colonel McDonald make an election under s 61B?
As noted above, Colonel McDonald made a statutory declaration on 23 February 2006. He also gave evidence at the hearing of this review. His evidence at hearing was consistent with his statutory declaration. I accept Colonel McDonald as a witness of truth.
In 2003, Colonel McDonald was in part-time Reserve service. He was offered a position in full-time ADF service. He says that he made an election to stay in the DFRDB scheme on the relevant form. He says that he is sure that he did this before he resumed full-time service because he showed the form to his then supervisor, Colonel Donald Higgins, in the building in which they were then working. When he resumed full-time service on 12 May 2004, he had a different supervisor and worked in a different building.
He says that, before he resumed full-time service, he took the form to the orderly room for “on-forwarding”. He explained that the orderly room provided administrative and human resource assistance. He said that he expected that the person in the orderly room to whom he gave the form would make a copy for his file, and post the form to ComSuper.
On 31 August 2005, Colonel Higgins made a statutory declaration at ComSuper’s request. He said that he recalled several discussions with Colonel McDonald in January–March 2004 in which Colonel McDonald “repeatedly stated his intention to remain with the DFRDB scheme during his period of continuous full-time service”. He also said that he recalled seeing Colonel McDonald’s completed election form.
ComSuper says that it has no record of receiving Colonel McDonald’s election form. A ComSuper file note dated 5 July 2005 indicates that extensive searches were conducted of relevant files held by the Department of Defence. The form was not found.
There is no suggestion that Colonel McDonald communicated with ComSuper about his election, before resuming full-time service, other than completing the form and giving it to a person in the orderly room.
On the basis of this evidence, I make the following findings:
·Colonel McDonald completed the form, electing to remain in the DFRDB scheme, and gave the form to a person in the orderly room with instructions to forward it to ComSuper.
I note that the same thing happened in Howie,[20] in which the Tribunal decided that no election had been made. But, in Howie, it was common ground that ComSuper did not receive the form before the member resumed continuous full-time service.[21] Colonel McDonald does not make that concession in this review.
·The person to whom he gave the form forwarded the form to ComSuper, but did not make a file copy.
I find this on the balance of probabilities. If the form was not dispatched, it is likely that it would still have been placed on Colonel McDonald’s personnel file. If the form had been copied, that copy would likely have been placed on the file. Neither the form nor a copy of the form has been found on Defence’s files.
·ComSuper received the form before Colonel McDonald resumed full-time service on 12 May 2004, and the form has been lost.
If the form was forwarded to ComSuper (as I have found) it is highly likely that ComSuper received it. And I think it was probably received before Colonel McDonald resumed full-time service.
[20] [2013] AATA 114.
[21] [2013] AATA 114 at [40] per Hotop DP.
It is unfortunate that there is very little evidence now available about the precise timing of these events, which occurred more than a decade ago. For almost eight of those ten years, Colonel McDonald assumed that ComSuper had accepted that he had made an election to stay in the DFRDB scheme, based on the statutory declarations provided. Had he not made that assumption, I would have expected there to have been more evidence before me about what happened to the form after he gave it to the person in the orderly room: for example, there could have been evidence from that person. However, I think that it was reasonable for Colonel McDonald to have made that assumption, especially given the telephone advice that ComSuper gave him on 1 February 2006 (see [6] above). He could have taken his form directly to ComSuper rather than taking it to the orderly room. He could also have followed up with ComSuper earlier than he did.[22] With hindsight, he should have done both of these things. But the fact that he did neither of them does not make him responsible for the long delay in the resolution of this matter, and the consequent lack of evidence.
[22] Colonel McDonald did not follow up with ComSuper about his form until 27 June 2005 (more than a year after he resumed full-time service), in response to ComSuper’s letter of 31 May 2005: see [4]–[5] above.
In the circumstances, and given the beneficial nature of the DFRDB scheme, I think it is appropriate to make the findings I have made above, notwithstanding the paucity of evidence. I do not think that such findings are inconsistent with the Federal Court’s decisions in Gregory and in Mathews. The inflexibility of the legislative scheme, which the Court identified,[23] is the strict requirement to make an election before returning to full-time service. I do not think that the Court was saying that a member must demonstrate, other than on the balance of probabilities, that they made such an election within time.
[23] (2011) 192 FCR 197 at [42] per Moore J (see [15] above).
Conclusion
Colonel McDonald made an election under s 61B of the DFRDB to become a contributing member of the DFRDB scheme before resuming full-time service with the ADF on 12 May 2004.
I certify that the preceding 35 (thirty-five) paragraphs are a true copy of the reasons for the decision herein of Senior Member Popple ..............................[sgd]..........................................
Associate
Dated 21 April 2015
Date of hearing 13 April 2015 Advocate for the Applicant Mr Steve Ridgway Counsel for the Respondent Mr Hamish McNair
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